Bullion trend analysis May 23

Post Time:2016-05-27 Resource:www.hj9999.com Views:

23-May (USAGOLD) — Gold continues to consolidate at the low end of the recent range as FedSpeak continues to propagate the potential for a rate hike at the June FOMC meeting. The dollar index remains well bid above the 95.00 level, keeping the yellow metal suppressed.
Since the release of the FOMC minutes last week, the central bank has done a pretty good job of fostering expectations of a rate hike. The odds of a June hike based on Fed funds futures have risen from 4% to 30%. Kind of makes you wonder why they didn’t convey the message contained in the minutes when they issued the official statement back in April . . .
Perhaps this is why the market remains somewhat skeptical with gold hovering around 5% off its recent highs. You may recall that as the Fed continued to ramp-up expectations for the first rate hike in nearly a decade, gold was pushed to nearly a 6-year low of 1046.00. When they actually pulled that trigger in December, gold launched on a nearly 25% rally marked by the 1303.80 high set earlier in the month.
We’re not seeing anywhere close to the same anticipatory selling in gold this time around. In fact, the only U.S. economic data out today, moved gold off the range lows: Markit flash manufacturing PMI came in at 50.5, below expectations of 51.0, versus 50.8 in April. It was the lowest print since September 2009, suggesting that the U.S. manufacturing sector continues to struggle.
If the Fed does in fact raise rates — and indicate that further hikes are in the offing — the dollar index could continue it’s rebound. That would put further pressure on manufacturers and the broader U.S. economy.
You may recall that the quarter following the Fed’s December rate hike saw meager 0.5% growth. While that number may be revised higher next week (+0.9% median), it should still be below 1%. So the stronger growth expectations that the Fed is using as the reason the economy could withstand another rate hike, may in fact be diminished by that very rate hike.
It is that conundrum that I think will factor heavily in the FOMC’s June deliberation, weighed against the Fed’s own credibility. If the second look at Q1 GDP misses expectations, I think we’ll quickly see June come off the table again.

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